Funding and Lines of Credit for Dropshippers and Ecommerce Newbies

Whether you’re an established online seller or looking to start selling online, you might be wondering how to increase your cash flow. Fundraising is essential to the success of any business venture. As such, decisions about funding your e-commerce business can make or break your expansion plans.

A business line of credit is a financing tool that helps businesses manage their cash flow, above all during growth periods and when expect customer payments. A Startup Business Credit Line (LOC) provides revolving credit if the startup has been in existence for at least six months. You can withdraw money, use it, pay it back and withdraw more.

Ideal uses for line of credit and small business financing

Lines of credit provide businesses with a safety net or buffer, financing expenses and operational activities. Most businesses, especially small and medium start-ups, don’t have cash in their bank accounts and it can be difficult to manage your operations. Common uses of lines of credit include:

  • Daily purchase of small goods or consumables.
  • Funding for variable costs such as growth projects and marketing.
  • Build a credit bridge between other loans and small business loan options that may take longer to apply for and receive funds.
  • Adding staff for seasonality, business expansion or other non-fixed costs.
  • Have cash to deal with business setbacks, disasters and other problems.

Depending on the source, you can have take various steps to qualify. The evolution of e-commerce means there are many financing options available. For e-commerce financing, you can apply for the type of small business loan that many other businesses offer.

Some companies also offer e-commerce venture capital and may be eligible for e-commerce grants. Some of the financing options available for e-commerce businesses include:

Supplier lines of credit

Sellers who do not require immediate payment are effectively offering short-term contracts business lines of credit. Depending on the repayment term and loan amount, you may need to provide financial information to obtain payment terms.

Credit cards, utility companies, telephone and internet service providers, web hosting companies and other vendors may not bill you until 30 days after you are billed. These credit terms may be provided free of charge, but discount may be withheld by delaying payment.

Bank lines of credit

Many commercial banks offer commercial lines of credit. To qualify, the business and owner may need to demonstrate a timely payment history over the past few months. If your credit score is low or your payments are delayed, start making your payments now.

Correct errors in the report before the loan officer reviews your credit history during the loan application process.

However, one of the problems with bank loans is that not only do you have access to funds when you need them most, but you also have to borrow a lot of money at a time.

This problem can lead to liquidity problems. Alternatively, interest must be paid before money can be borrowed, which can have a huge impact on margins. It is best to seek the advice of an expert to choose the best entrepreneur financing option for your start-up.

Invoice financing

Invoice financing is an e-commerce financing option that helps with cash flow issues. For this business loan, you work with lenders who hold up to 85% of unpaid bills. It’s a popular option for many e-commerce startups. You can research more to gauge its suitability for your needs.

Business credit card

Credit cards are generally easy to obtain, use and manage. Moreover, most people know it, which makes it common in the population.

Business owners should consider the pros and cons of credit cards when deciding whether to use them as their primary source of funds. They must be part of the seller’s short-term share capital.

However, it’s best to learn as much as you can about this financing option to make sure it’s right for your business. Whether you use personal credit cards or business cards, this type of financing can quickly becomes expensive. With high interest rates and late fees, credit cards can hurt small businesses if sales slow.

The retail economy is rapidly shifting towards consumer goods, which is good news for e-commerce entrepreneurs. There are other ways to access e-commerce finance and other types of e-commerce finance to consider. When financing your e-commerce business, you want the best option for your needs.

About Dora Kohler

Check Also

The easy way to explode your online business

Starting your own website can be an exciting process. However, there are also some daunting …